(Ecofin Agency) - ICBC Standard Bank, formerly wholly owned subsidiary of the South African banking group Standard Bank was finally sentenced Monday, November 30th by British justice, to pay a fine of $ 32.6 million, in the framework of a corruption case which occurred four years ago in Tanzania and involved its local subsidiary Stanbic Bank Tanzania.

Shareholders of the penalized bank are still to decide on how to solve this issue considering that when the case emerged, the Tanzanian subsidiary, as well as the one based in London, was 100% owned by the South African group. Meanwhile, Industrial and Commercial Bank of China became the majority shareholder of the group (20%), but also took over a 60% stake in the London subsidiary.

This resulted from the establishment of a new procedure in the UK business litigation law, and allows companies which have been found guilty, accomplices or beneficiaries of proven fraud, to obtain a stay of proceedings, and thereafter withdrawal of the said proceedings, provided it respect a number of commitments it takes with the prosecuting authorities.

The case is typical of illicit financial flows leaving Africa. Standard Bank and its Tanzanian subsidiary were chosen as arrangers of the sovereign bond of $600 million issued by Tanzania between 2012 and 2013. The fee payable to the group represented 1.4% of the amount mobilized but finally became 2, 4%.

This 1% increase equivalent to $6 million was justified by the need to pay a consultant and Tanzanian local partner appointed EGMA. He had as president and shareholder, Harry Kitilya, who was director of the tax administration in Tanzania and as CEO, Fratern Mboya, the former head of the equivalent in the same country, the Committee on Financial Markets .

Now it appears that the $6 million in the account of EGMA housed in Stanbic Bank Tanzania, were removed a few days after they are filed, and has never been heard, posing strong suspicions of corruption.

Standard Bank has recognized the involvement of its subsidiary and took responsibility. The director of its local subsidiary at the relevant time had already been dismissed, while the head of the investment arm of the subsidiary, resigned. The director of taxes, also president of EGMA was removed from his office, while the representative of the financial markets regulator is now deceased.

This case is a reminder of the challenges of an Africa which is increasing in the number of poor, whilst multinationals, with the complicity of local authorities sometimes fraudulently make billions of dollars off the continent. Illicit financial flows from Africa have become a matter of great concern because of their size and their negative effects on development and governance.

According to some estimates, they could reach $50 billion a year, almost the double of the official development assistance (ODA) received by the continent.

Idriss Linge